A federal judge has given preliminary approval to a settlement under which The Hartford Financial Services Group Inc. will pay $72.5 million to more than 21,000 people nationwide who alleged the insurer engaged in fraud in settling their injury claims.
U.S. District Court Judge Janet C. Hall approved the agreement last week in Bridgeport to resolve the class action lawsuit. It was announced Monday by attorneys for those who sued.
The plaintiffs alleged The Hartford engaged in fraudulent settlement practices by deducting up to 15 percent of the value of their settlements in undisclosed annuity costs.
"It's a great settlement because people who have been victimized by corporate fraud are getting reimbursed,'' said David Golub, one of the attorneys for the plaintiffs.
The Hartford said the claimants received the promised amounts they were due. It said the company settled to avoid the uncertainty and cost of continued litigation.
The company did not admit to fraud as part of the settlement. Company officials said it disclosed the settlement in its first quarter earnings report.
Its shares rose 91 cents, or 3.8 percent, to $24.92 in midday trading.
The 21,000 people were due payments for claims dating to 1997 involving car accidents, workers compensation and other injuries. They are expected to receive an average of about $3,300 each as a result of the settlement.
At issue were structured settlements in which payments are made over time rather than in a lump sum paid at the time of settlement. Such settlement payments are typically funded with annuities.
The lawsuit alleged The Hartford developed a scheme in which its property and casualty companies purchased the annuities from its life insurance subsidiary, which then paid a kickback to the property and casualty companies. The lawsuit accused the company of violating a racketeering law.
The Hartford retained about 15 percent of the value of the structured settlements to cover profits, taxes and costs, according to the lawsuit.
The settlement, expected to receive final approval in September, came after extensive mediation and five years of litigation in which Hall certified a nationwide class action and an appeals court rejected the company's challenge to class certification last year. The trial was scheduled to start in September.